UPDATES with comments from OCC: Ten mortgage servicing companies will pay $8.5 billion in “cash and other assistance” to borrowers and former borrowers under an agreement that replaces an independent review of possible servicing errors, federal regulators announced Monday.

The payments include a total of $3.3 billion in cash to about 3.8 million borrowers whose loans were serviced by one of the 10 banks and were in any stage of the foreclosure process in 2009 or 2010. These borrowers could still be in their homes and receive a payment.

The banks will also provide $5.2 billion in other assistance — such as loan modifications and forgiveness of deficiency judgments — to a wider universe of borrowers, not just those covered by the cash payments, according to Brian Hubbard, a spokesman for the Office of the Comptroller of the Currency. “The soft dollar assistance can be directed to anyone,” he said.

People who are eligible for the cash payments don’t need to do anything. They will be contacted by a payment agent by the end of March, and checks could begin going out shortly thereafter, Hubbard said. They will receive a payment whether or not they applied to have their case reviewed. Borrowers who receive a payment will not be required to give up their right to sue the banks for additional compensation.

Borrowers who want to share in the $5.2 billion in other assistance “should continue to work with their servicer on loss mitigation efforts,” Hubbard said.

Four banks that were part of the review process have not signed the agreement: Ally, HSBC, OneWest Bank and Everbank. “Conversations are continuing” with those banks, Hubbard said.

The Federal Reserve and Office of the Comptroller of the Currency, under an enforcement action in April 2011, ordered the servicers to contact 4.4 million borrowers who were in foreclosure in 2009 and 2010 and offer them a chance to have their cases reviewed for possible servicing errors. If independent auditors found evidence of robo-signing, improper foreclosures or other errors, the borrowers would receive compensation from the servicers.

Response to the offer was so tepid that the deadline was extended several times and the servicers were ordered to do additional outreach. Even so, by Dec. 31, the final deadline for requesting a review, only 495,000 people out of 4.4 million contacted had asked for one.

Consumer groups criticized the low response rate and questioned the independence of the auditors, who were being paid by the servicers.

Meanwhile, reviews were taking far longer than expected — up to 20 hours per loan file at a cost of up to $250 per hour, according to the New York Times. No one has yet received any payment under the review process.

Regulators said the agreement will provide compensation “in a more timely manner than would have occurred under the review process.” Hubbard admitted that “as a consequence of the settlement, some (borrowers) will receive a payment even though there was no error in their foreclosure.”

This agreement is separate from a settlement the five largest servicers reached with federal regulators and 49 state attorneys general early last year. That agreement is providing $20 billion in compensation to borrowers, including $1.5 billion in cash payments to as many as 1.8 million people who lost their homes between 2008 and 2011.

Consumer groups are not wholly satisfied with the latest agreement.

“The Independent Foreclosure Reviews were deeply flawed, and any movement towards more compensation for homeowners is a step in the right direction,” Alys Cohen, staff attorney for the National Consumer Law Center, said in a press release. “However, the capped pool of cash payments is wholly inadequate in light of the scale of the harm. If the reviews had been done right the first time, banks would have been on the hook to pay far more to homeowners, even though the planned scheme for recompense fell far short of full compensation.”

Separately on Monday, Bank of America reached an $11.6 billion settlement with Fannie Mae over soured loans that Countrywide Financial originated and sold to Fannie between 2000 and 2008. BofA purchased Countrywide in 2008. BofA will pay Fannie $3.6 billion in cash and repurchase $6.75 billion in soured loans from Fannie.

BofA will also pay Fannie $1.3 billion to resolve loan servicing compensatory fee obligations. Fannie spokesman Andrew Wilson said its servicing contracts with banks allow it to assess fees when they don’t meet certain requirements such as not reaching out to borrowers in danger of foreclosure quickly enough or, on the flip side, not foreclosing quickly enough.

In its announcement, BofA said it would sell mortgage servicing rights on a total 2 million home loans, about half of which are owned or insured by Fannie. The acquirers include Walter Investment Management (parent of Green Tree) and Nationstar Mortgage Holdings.